Crude oil oversupply, Trump may not be able to "call for" production increases.

The President-elect of the United States, Donald Trump, has vowed to "drill, drill, drill" for oil, but this vow is set to clash with a global oversupply of crude oilultimately curbing record-breaking shale oil production. Trump has said he will push U.S. shale oil companies to increase productionhe told supporters that oil prices will fall, even if it means producers "going out of business from drilling." However, in the two years before his second term, U.S. oil production has set records continuously. Against this backdrop, analysts and traders surveyed by accepting institutions predict that U.S. oil production will increase by only 251,000 barrels per day from the end of this year to 2025, the slowest pace since the production cuts caused by the pandemic in 2020. Trump has almost no means to change this. Opening up new federal lands for exploration takes time, and some of his other proposalslike the trade war with Chinaare widely seen as bearish for oil, as they would weaken demand for this commodity. Ed Morse, senior advisor at commodity trading company Hartree Partners LP, said, "From opening federal land to offering auctions, to letting companies bid, to exploring, finding oil, and building infrastructure for it, there are delays. Most of the production growth brought by Trump's policies will come after his term ends." So far, the independent oil producers that have contributed most to the shale oil boom over the past 10 years have no plans to fundamentally change their drilling activities after the election. Companies like Diamondback Energy (FANG.US) and Devon Energy Corporation (DVN.US) expect production growth rates of 2% or lower by 2025, while EOG Resources, Inc. (EOG.US) and Occidental Petroleum Corporation (OXY.US) expect activities to remain flat. Occidental Petroleum Corporation CEO Vicki Hollub warned that mid-term production capacity in the U.S. is "slowing." However, oil producers are still significantly expanding production. Last year, despite independent producers pledging limited production increases, shale oil production still increased by 1 million barrels per day, surprising the market. Heavyweight oil producers like Exxon Mobil Corporation (XOM.US), Chevron Corporation (CVX.US), and ConocoPhillips (COP.US) are also rapidly expanding, with growth exceeding 8% in the past year. Macquarie Group, which correctly predicted last year's phenomenal production growth, estimates that by the end of this year, oil production will reach an unprecedented 13.9 million barrels per day, 5% higher than the current estimate from the U.S. Energy Dept. This growth, along with increased crude oil production in Guyana, Brazil, and Canada, sets the stage for a massive oversupply of crude oil by 2025. The International Energy Agency (IEA) warns that global oversupply will reach 1 million barrels per day. Macquarie expects Trump to be sworn in the first quarter, by which time daily oil production will exceed demand by 2.4 million barrels. Traders have already factored in the surplus in pricing, with WTI crude oil prices falling more than 3% this year. This is in stark contrast to when Trump first took office. In 2017, new investments from private equity and oil giants poured into the oil sector, prompting producers to develop as quickly as possible and consuming $300 billion in cash in the process. The pandemic dragged down prices, leading to labor shortages in shale gas regions, port equipment imports being blocked, and banks reducing loans to the industry. Dozens of companies subsequently went bankrupt. But those that survived were forced to cut costs, increase efficiency, and when oil prices began to rise at the end of 2020, they began to grow again. Under Biden's leadership, the U.S. has solidified its position as the world's largest oil producer, now producing 50% more oil per day than Saudi Arabia. However, this pace is difficult to maintain. The $290 billion wave of mergers and acquisitions in the past two years means that many independent producers who drove production growth during Trump's first term have been acquired or merged into larger entities that control capital expenditure and enhance shareholder returns. The oil industry has seen a number of major mergers in the past two years, with companies like Pioneer Natural Resources Company being acquired by Exxon Mobil Corporation, Endeavor Energy Resources being acquired by Diamondback, and CrownRock being acquired by Occidental Petroleum Corporation. However, Raoul LeBlanc, vice president of North America Unconventional Oil and Gas for S&P Global, Inc., said that oil prices may ultimately become the biggest obstacle to U.S. economic growth. He said, "At $70, independent shale oil companies can both develop and generate free cash flow, but at $60, they have to make choiceswe believe they will choose to provide cash to shareholders."